From GreenBiz (of course) to Forbes to Fortune, Bloomberg to The Wall Street Journal, a young company named Mosaic has been getting a lot of attention of late. Why? Because Mosaic is bringing crowdsourced funding to the world of solar PV.
Crowdfunding is nothing new. Companies such as Kickstarter have allowed individuals to fund everything from their next indie film to extensive out-of-pocket medical bills with pooled donations from family, friends and other supporters. But thanks to last year's JOBS Act, debt-based crowdfunding is now an option as well, in which investors come together to fund startups and small businesses in return for repayment plus interest in a company like Mosaic.
It's inclusive, meaning that investors of all shapes and sizes can get into the game. And it currently makes for a good, low-risk investment. Mosaic — with more than $1.1 million invested in solar projects to date — boasts 4.5 to 6.5 percent risk-adjusted annual returns, besting the latest interest rates on 30-year Treasury bonds.
But much of the crowdfunding solar coverage underemphasizes a key point: Funds raised from the crowd — in addition to providing attractive returns for investors and enabling more solar installation period — also have the potential to lower the cost of electricity from solar PV systems in the here and now.
Solar finance: credit card vs. mortgage rates
Imagine for a moment that a credit card company issues a card with a $200,000 limit. Next, let's imagine a homeowner taking that card and buying a new home for $200,000 with a 30-year term, just like most home mortgages. This lucky homeowner just bought a new home for $0 down!
There's a problem, though. Financing a home purchase with this hypothetical credit card is a seriously bad deal for the homeowner since the annual interest rate would be 13 to 15 percent, according to Bankrate.com, which translates into extremely high monthly payments. Instead, most homeowners finance homes on 30-year terms with more reasonable interest rates in the 3 to 5 percent range. Such inexpensive, single-digit bank debt is a key to making the financing work, since the cost of the debt is a huge factor in the overall cost of the purchase over the term of the deal.
Just as financing solutions like credit cards and home mortgages help families buy new appliances and homes, several different finance solutions are helping solar energy systems be deployed on homes and businesses throughout the U.S. today. In fact, about 75 percent of residential solar photovoltaic projects and 40 percent of commercial ones are financed with different "third-party ownership" models where electricity users install a solar system with little to no money down and start saving money from day one.